Why Turkey and Taxes Go Together: Year-End Tax Planning Opportunities

by | Nov 6, 2023

The days are getting shorter, but your to-do list around the holidays is probably getting longer. While it can be a crazy (and magical) time of the year, it is also the most crucial time to plan for your 2023 tax filing. Why? Because there are a lot of decisions and deadlines to meet before the final months of the year that could mean hundreds or thousands (for better or worse) difference in your tax liability when you file next year. Each year as you focus on the holiday season, a friendly reminder that it also is tax planning time (yay! Family and taxes, everyone’s favorite things!)😊.


Read on to learn about a few opportunities to help you save money this year.


Important Deadline!

Thinking about hiring a tax professional or financial planner to help you with 2023 taxes and more? Be sure to hire them ASAP since most of the game-changing decisions/actions that can be taken to help reduce your tax liability will need to be completed by the end of the year. November may even be too late for some planning opportunities😬. 




Rebalancing and tax-loss harvesting. 

A common and important year-end strategy for saving in taxes is called Tax Loss Harvesting. This means you are selling investments like stocks, bonds, ETFs, or other investments that haven’t performed well this year and have a loss. When you sell those investments at a loss, you can use that loss to offset any taxable gains in your investments this year. If you had more losses than gains in your investments this year, then you can use $3,000 of those losses against your income instead. The limit for deducting losses against your income is $3,000, but if you have more than that you can roll over those losses to deduct income in future tax filing years!


Tax loss harvesting can occur when you rebalance your portfolio regularly. When you rebalance your portfolio, you are selling and buying stocks/bonds or other investments that are out of alignment with your target asset allocation. This results in selling investments that have too high of a concentration in your portfolio and buying investments that you don’t have enough money invested in (buying low, selling high, the winning combination). 


Rebalancing can trigger capital gains tax if you have held this investment for more than a year which is taxed at the Capital Gains tax rate, but if you have held the investment for less than a year it will be taxed as ordinary income (something to avoid if possible). It’s important to discuss the effects of rebalancing with your financial planner and tax professional. 


Charitable Donations


Donate highly appreciated assets for a tax deduction. 

If you have stocks or other assets that will incur capital gains when you sell, consider using these when you make your charitable contributions for the year. Not only do you benefit by not having recognized the gain, but you will also receive a deduction in your taxes for the charitable contribution (up to 30% of your AGI, which is your total gross income minus certain deductions). Cash donations to qualified charities can be deducted to up to 60% of your AGI. You can also use a donor-advised fund to have greater efficiency and less headache around tax time to make your charitable contributions.


Due to processing time, it is recommended that you open your donor-advised fund account by November 30th to ensure enough time for processing your account and submitting transfers into the account. If you are wanting to contribute more than stocks or other liquid assets, refer to this site for suggested deadlines. 


Retirement Savings

Make your IRA contributions. 

For IRA contributions, you have until you file your tax return (usually April 15th) to save to your Traditional and Roth IRA retirement accounts. While this isn’t an end-of-year deadline, it is a reminder that putting off investing means missing out on months of returns and compounding growth for retirement. It’s generally not best to wait to make these contributions so you don’t miss out on market growth. However, if you aren’t sure if your income will be too high to contribute, you can take advantage of the flexible deadline when you file your taxes.


Fund Employer-Sponsored Retirement Accounts

If you have a 401(k), 403(b), or another retirement account, be sure to check your contributions to see if you are on track for your funding goal this year. If your employer offers a match, it is highly recommended to contribute at least up to their match, but if you can fully fund your account (see limits here) then you will reduce your taxable income. The deadline for these contributions is December 31st. 


Other Tax-Advantage Savings

Health Savings Account

Your HSA is your most powerful account for retirement as it has a triple tax-free benefit. Contributions to your HSA are pre-tax, you can invest your HSA funds and the investments grow tax-free, and when you take out funds for healthcare expenses in retirement the withdrawals are tax-free. In order to qualify for the deduction, you must qualify for the HSA and have the account before December 31 of the tax year. You also must have the account for at least a year after to avoid any tax penalties. The HSA contribution limits for 2023 are $3,850 for self-only coverage and $7,750 for family. An additional catch-up contribution is available for those 55 and up. 


529 College Saving Contribution

A 529 plan is a college savings plan sponsored by a state that can help you save and invest to pay for education-related expenses such as tuition (college, graduate, vocational schools, or K-12), books, student loan payments, campus housing, and other qualified expenses. Contribution to the 529 Plan can save you money on state taxes and should be made by December 31st. However, there are a few states that don’t require a year-end deadline but instead require contributions at the time of filing state taxes. These states include Iowa, Georgia, Mississippi, Oklahoma, South Carolina, and Wisconsin.


End Of Year Checklist:

  • Talk to your financial planner to make sure you are rebalancing your portfolio and taking tax loss harvesting opportunities
  • Check with your tax professional to see if you are on track for tax withholding/payments
  • Talk to your planner about opening a Donor-Advised Fund if you are planning on making charitable contributions with the added bonus of helping reduce your tax liability
  • Make sure you are on track for fully funding your retirement accounts (or making sure you haven’t contributed too much)
  • Determine if there are other tax savings opportunities such as contributing to an HSA (if you qualify), opening a 529 plan, taking advantage of any potential tax credits, etc.


Some of the most impactful decisions you will make for your taxes will occur before the end of the year. Don’t wait until jingle bells start ringing to make money moves to reduce and optimize your tax liability.